- Although one person doesn't make a company as a whole, the strength of a CEO or Chairman can have a very strong impact on a company's overall performance.
- There are many different qualities, strategies, and philosophies that can make a leader "bankable" or trustworthy.
- Sometimes a CEO can be bankable due to a unique situation within their own company, but other times their skills are transferable to other organizations.
In his recent book, "Get Rich Carefully," CNBC star analyst Jim Cramer published a chapter called, "The Bankable 21," where he highlighted 21 respectable leaders who know how to run a company profitably, ethically, and productively. Cramer pointed out that in football, there is a high correlation between the effectiveness of the head coach and the success of the team as a whole, and it works the same way in business. "The role of a CEO is integral to the success of the company and its stock."
After reading Cramer's list of bankable CEOs, I thought it would be an interesting exercise to come up with a list of bankable leaders of my own, along with the reasoning to back them up. They each have their own philosophies and unique perspectives that make them a bankable leader. Here is my list of what I would like to call, "The Bankable Eleven:"
Arguably the world's most successful investor, Warren Buffett is best known for buying out a dying textile mill known as Berkshire Hathaway, and turning it into one of the world's largest and most profitable conglomerates of value-oriented, dividend-raising businesses with wide-moat competitive advantages and consistent profits. Since 1990, Berkshire Hathaway outperformed the S&P 500 approximately 2,500% to 400%. He has warned that such a massive outperformance is unlikely to repeat itself due to Berkshire's size, but he has predicted that Berkshire will still do better than the S&P 500 over the next full-market-cycle period. In February 2012, Buffett accurately predicted that stocks would outperform gold and bonds. Buffett's net worth grew from $10,000 at the age of 21 to nearly $60 billion today, with much of it being donated to charity. Despite being wealthy, he still lives in a modest home, drives a regular car, and lives a humble lifestyle.
2. Thomas Gayner, Executive Vice President and Chief Investment Officer of Markel Corp. (NYSE:MKL):
Thomas Gayner has been the leader of Markel Gayner Asset Management (Markel's investment division) since 1990, where his investing strategies and Buffett-like principles applied to Markel have allowed him to significantly outperform the S&P 500 by a margin of 2,200% to 360%. Gayner has said that about twelve years ago, he was able to outperform by owning a lot of small-cap and mid-cap stocks during a time when large-cap stocks were expensive, a much different situation than today where large-cap stocks are attractively priced while small-cap stocks appear to be relatively expensive. Gayner has four main investment principles:
-High Returns on Capital: Gayner wants above average businesses that produce high returns on capital and require little additional capital.
-Management with Integrity and Talent (both are equally important)
-Compounders: Gayner looks for businesses with attractive reinvestment opportunities. He wants high returns on capital, and he also wants the economics of the business to be such that the company can compound earnings and cash flow and grow intrinsic value over time (compounding machine).
-Valuation: He doesn't want to pay too much, although he mentions that he is willing to pay a fair price for these compounders, as they will grow shareholder value steadily over time.
3. James Harris Simons, Founder and CEO of Renaissance Technologies: Simons is an American mathematician, hedge fund manager, and philanthropist, with a net worth of $12.5 billion. Renaissance Technologies takes a purely mathematical approach to investing, employing many specialists with non-financial backgrounds including mathematicians, physicists, signal processing experts, and statisticians. In 2006 Simons was named Financial Engineer of the Year by the International Association of Financial Engineers. Renaissance Technologies is best known for its Medallion Fund, which has achieved returns of 2,478.6% over an eleven-year period ending in December 1999.
A self-made billionaire with a proven track-record, Dr. Phillip Frost has expressed a great deal of confidence in Opko Health with massive insider buying. He has been buying shares of Opko Health in heavy volumes on a regular basis for the past two years. He has a net worth of $3.3 billion, and his investment trust holds a position in Opko that is worth approximately $1.5 billion. Dr. Frost has achieved great returns on his investments through various companies, many of which ended in eventual acquisitions:
- Key Pharmaceuticals: $5 million invested, grew to $180 million, acquired by Schering-Plough in 1986 for $600 million.
- IVAX: $100 million invested (including open market purchases), grew to $1.5 billion, acquired by Teva Pharmaceuticals in 2006 for $7.4 billion. Funds that were invested from the 1987 IPO and held all the way until the 2006 acquisition achieved a return of 6,742%.
- Continucare: $16.8 million invested, grew to $170 million, acquired by Metropolitan Health Networks in 2011 for $416 million.
- Dreams Inc.: $2 million invested, grew to $15 million, acquired by Fanatics Inc. in 2012 for $183 million.
5. Mary Barra, CEO of General Motors (NYSE:GM): Mary Barra was recently praised by Warren Buffett, being described as someone who "would do a good job running any business" and "the best person to handle the company's recall problems." She has been quick to apologize for the company's recall issues, acknowledging that "terrible things have happened," and she is dedicated to improving the company's operations. Having been a long-time veteran at General Motors, she has seen the company's mistakes, and this has prepared her to handle situations of crisis, and to prevent these mistakes from being repeated in the future. Despite negative headlines on the company's recall problems surrounding the media during the past month, the company reported a very positive quarter, with "all four brands performing well in a growing economy and 17 vehicle lines posting double-digit retail sales increases or better." It appears that General Motors' profitability may have been unfazed by the recalls, as the company reported very robust sales during a month that contained poor consumer confidence data.
Larry Page has always had a vision of technology and innovation, and he was able to make that vision come true by building one of the world's most successful companies, Google, which has significantly outperformed the S&P 500 since its IPO in 2004, achieving a near-ten-fold return. While Google collects most of its revenue from advertising, Page implemented a growth-by-acquisition strategy that diversified the companies' assets. There are some acquisitions that are difficult to understand at first glance that turn out to be a major success; YouTube was acquired for $1.65 billion, but now produces $5.6 billion in annual revenue for Google. Page has ensured his employees are treated with quality and respect, with top notch benefits, free meals and other generous perks. Page's vision for the company's innovation has extended into new and innovative ideas, such as driverless cars. Larry Page is now an investor in Tesla Motors.
7. Mike Ullman, CEO of J.C. Penney (NYSE:JCP): After the company tried a failed experiment with Ron Johnson's crazy changes, the company brought back its old CEO, Mike Ullman, to restore its classic brand and bring the company back to its roots. A company with a heavy debt load, that was on the brink of bankruptcy, may have finally reached a point of stabilization as it recently reported a quarter that beat earnings estimates. Johnson lost customers after abandoning the chain's history as a promotional retailer by switching to everyday low prices and trying to lure shoppers with new brands. Ullman quickly brought back discount events to give shoppers a reason to visit stores again and revived well-liked private-label brands such as St. John's Bay that Johnson had removed. I consider Ullman to be a bankable CEO because he understands what the customers want, and he is restoring a sense of normality back into the company.
8. Stephen Holmes, CEO of Wyndham Worldwide (NYSE:WYN): Since the bottom of the market collapse in March 2009, Wyndham Worldwide has been the single best performing stock in the entire S&P 500, achieving a return of over 1700%. Stephen Holmes believes that the most important thing a company can do for its shareholders is return capital. He implements an approach that consistently raises Wyndham's dividend yield and aggressively buys back shares. He also values diversification, as he recognizes that it gives the company a great deal of resilience.
9. Emil J. Brolick, CEO of Wendy's (NASDAQ:WEN), former CEO of Yum Brands (NYSE:YUM): Brolick is a "proven brand builder" in the restaurant industry. He led a turnaround for Taco Bell and drove strong same-store sales growth. He was also one of the primary architects of Wendy's strategy in the late 1980s, which produced 16 consecutive years of same-store sales growth for the brand. Wendy's has been struggling since the company lost its founder, Dave Thomas. After going through six CEOs since 1995, Wendy's may have finally found a CEO who is likely to stick around long-term. Brolick's formula for success is: Have a vision, a strategy, define reality, give hope and execute. More recently, Emil Brolick has presided over Wendy's turnaround, featuring brand re-imaging, restaurant remodeling, new products such as the Pretzel Burger, which turned out to be a great success.
10. Michael Small, CEO of GoGo (NASDAQ:GOGO): Michael Small has a technology-based vision to keep his business innovative by improving the speed and efficiency of his products. He is often giving public interviews about his company to the media, showing a great deal of transparency. Michael Small is always prepared to present his product offerings and make the bullish case for his company. When asked about potential competition, Michael Small responded, "GoGo is a pioneer leader in in-flight connectivity, it's clearly going to transform the flying experience, I can't imagine a world where all aircraft aren't connected with broadband connectivity over the next decade, and it's clear to me that we're going to attract competition, we think we're the leader, we have the most aircraft installed by a wide margin, that's several-fold are closest competitor, we're going to have to fight hard for global market share, but we're up to the task and ready." When GoGo's stock recently plunged on the news of AT&T's entry into the market, Michael Small wasn't at all worried about the potential threat. Instead of selling in fear along with the crowd, he bought more shares of GoGo, expressing a great deal of confidence in the sustainability of his company's competitive advantage. This proved to be a wise decision, as GoGo's stock quickly recovered during the following weeks ahead. While GoGo may be in a good position to be an acquisition target for an airline as the leader of the growing WiFi industry, Michael Small has said he has no plans to sell the company because he understands the company is already in the best hands. Michael Small was recently named an Ernst & Young Entrepreneur of the Year and CEO of the Year from the Illinois Technology Association.
11. Vince McMahon, Chairman of World Wrestling Entertainment (NYSE:WWE): Vince McMahon's approach to business involves being more of a risk-taker. His vision implements new programs that can transform his company into something that is bigger and better. Being a bankable leader doesn't mean he's perfect; some of his ideas such as the XFL and World Bodybuilding Association didn't work out very well. However, being willing to take a chance on new ideas is sometimes necessary to keep a company current with modern trends. His most recent innovation is the launch of the WWE Network, which is on track to exceed its break-even goal of 1 million subscribers. While the program appears to be on track, investors' reactions have not been kind to the company's stock, as it plunged 43% on the day when the details of its TV deal were released. In response, McMahon hosted an emergency conference call to give a more open and honest outlook of the company's earnings outlook. This shows that he is making a sincere effort to display transparency to his investors.
Another great quality Mr. McMahon has is his willingness to go out on the front-line battlefield. Not very many CEOs can say they put their health and physical well-being on the line for the sake of their company. Vince McMahon occasionally gets in the ring to wrestle once in a while, and this gives him the experience of taking bumps, so he knows first-hand what his wrestlers go through. He even got seriously injured in January 2005 when he tore both of his quadriceps. I believe it is important for a CEO of any business to get out on the front line and experience what their staff goes through on a day-to-day basis, as it gives the CEO a perspective on what it takes to run their business at all levels, inside and out.
Disclosure: I am long BRK.B, MKL, OPK, GM, WEN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.